India's International Reserves: How Large and How Diversified?
Asymmetric foreign exchange intervention by the Reserve Bank of India (RBI) has resulted in a sustained accretion of Indias foreign exchange reserves. The reserve buildup in India has certainly been impressive, rising from around US$5-6 million in 1991, to nearly US$300 billion in mid 2008. In addition to addressing the issues of reserve adequacy, this paper examines the forms the reserves have taken (asset and currency composition), and the extent to which Indias reserve holdings are diversified.The issue of reserve adequacy was made apparent during the 1990s and early 2000 when rapid reserve depletion became a defining and determining feature of the series of currency crises that hit emerging economies. In order to assess the adequacy of Indias stock of international reserves, the paper considers a few standard measures used in literature and finds that Indias reserve stock is more than adequate, placing them in a much better position than many other emerging economies.The paper goes on to examine the asset and currency composition of such reserves. More than 50 percent of Indias reserve holdings have been in the form of foreign currencies and deposits as cash, followed by investments in foreign securities and gold deposits, in that order, reflecting a high degree of risk aversion by the RBI in the management of the reserves.While data on asset composition are available, the currency composition of reserves is a well-guarded secret. Hence the paper undertakes some simulation exercises to arrive at some reasonable guesstimates of such a composition. The paper also makes use of the Treasury International Capital Reporting System (TIC) data to track Indias investments in the U.S. securities, thereby assessing the weight of U.S. dollar assets in Indias reserve holdings.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 10 (2010)
Issue (Month): 3 (October)
|Contact details of provider:|| Web page: http://www.degruyter.com |
|Order Information:||Web: http://www.degruyter.com/view/j/gej|
When requesting a correction, please mention this item's handle: RePEc:bpj:glecon:v:10:y:2010:i:3:n:6. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.